7 Experts Discuss Best Practices On Taking Your Cannabis Company Public
Many companies in or serving the cannabis industry have turned to the public markets
Access to capital is critical for any industry. The state-legal cannabis industry struggles in this area for several reasons, including federal illegality, stigma issues that reduce the investor base, the capital intensity of many of its businesses (like cultivation facilities), the lack of financial intermediaries due to limited banking availability and a litany of rules at the local and state levels that can change very quickly and create risk for owners.
Many companies directly in or serving the cannabis industry have turned to the public markets in order to facilitate raising capital. 420 Investor tracks over 350 companies in North America that trade publicly, the vast majority on the OTC Markets, rather than the NASDAQ or NYSE. While entrepreneurs in the cannabis industry already face stigma issues running their businesses, the additional stigma of “penny stocks” is one that perhaps keeps them from pursuing the option of going public.
After a meteoric rise in early 2014 following the global media frenzy surrounding the opening of retail cannabis stores in Colorado, the bubble burst had burst by March, and cannabis stocks, as measured by the 420 Investor Marijuana Index, fell 97% over the next 23 months. The market has rebounded since the lows in mid-February by about 30% or so.
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